High-Deductible Plans to Curb Physician Spending, CMS Says

Alicia Ault

July 14, 2016

Overall spending on healthcare is expected to grow 5.8% annually, outpacing the overall gross domestic product by 1.3 percentage points between 2015 and 2025. Yet growth in spending on physician services during the next decade is likely to be significantly slower, limited in part by the continuing rise of high-deductible health plans that require patients to foot more of the bill, according to a new report by government analysts.

Actuaries at the Centers for Medicare & Medicaid Services (CMS) said that at this time, one in four employer health plans had high deductibles in 2015, up from one in five in 2014.

"Research has found that moving into high-deductible health plans or being subject to other increases in cost sharing tends to have a disproportionate impact on the use of physician and clinical services, such as preventive care," write Sean P. Keehan, an economist in the Office of the Actuary, CMS, in Baltimore, Maryland, and colleagues.

The authors report projections for the nation's health spending from 2015 to 2025 in an article published online July 13 in Health Affairs.

Keehan and colleagues note that 2015 was the first year of an expected 4-year trend of accelerating out-of-pocket spending resulting from both fading coverage gains under the Affordable Care Act and more people being moved to high-deductible plans or coverage that requires other forms of increased cost sharing.

The American College of Physicians recently warned that cost sharing has become a major threat to Americans' health. "Evidence shows that when cost sharing is imposed, consumers may respond by reducing their use of both necessary and unnecessary care," said Nitin S. Damle, MD, president of the American College of Physicians, in a statement released this week.

Cost sharing hits low-income and sicker individuals particularly hard, Dr Damle said.

According to the CMS analysis, in 2015, overall spending on physician and clinical services accounted for $636.3 billion of the nation's total $3.2 trillion health bill. The rate of growth on physician and clinical services increased by 5.4%, which represents 0.8–percentage point faster growth than in 2014.

However, after a 0.5% growth in 2014, prices for physician services declined by 1.1%, mostly because the temporary increase in Medicaid payments to primary care physicians expired.

The increase in spending in 2015, including hospital spending, was largely driven by the decline in the number of uninsured, the CMS actuaries said. Some 7.2 million people added coverage in 2015, according to the report.

ACA Credited With Slower Growth

CMS officials said in a related news release that estimates of overall spending growth in 2015 and going forward are still lower than the 8% average in the 1990s and early 2000s, and credited the Affordable Care Act for the slowdown.

"The Affordable Care Act continues to help keep overall health spending growth at a modest level and at a lower growth rate than the previous 2 decades," said CMS Acting Administrator Andy Slavitt. "Per capita spending and medical inflation also remain at historically very modest levels, demonstrating the importance of continuing to reform our delivery systems," he said, also noting the big increase in the number of people with insurance.

Going forward, the coverage gains will be smaller, especially in Medicaid, according to the projections.

Medicaid spending will still increase 5.3% in 2016, but that's almost half of the 10.8% increase in 2014 and 2015. Similarly, spending by Medicaid on physician services grew 11.4% in 2015, but will only rise 5% in 2016, according to the CMS actuaries' report.

Overall spending on physician services will eke forward in 2016, rising by only 4.5%, which is a full percent less than in 2015. The slower growth will largely be the result of the shift to high-deductible plans and the slowdown in Medicaid enrolment and spending.

The CMS actuaries also see physicians being affected in 2016 by private health plans' continued expansion of "narrow networks" of providers, designed as a way to "prevent sharp increases in health prices."

Inpatient services will rebound in 2016, which will drive an increase in hospital spending, especially by Medicare, Keehan and colleagues said. In addition, prescription drug spending will moderate somewhat in 2016, growing by 6.3%, and 6.7% going forward, which is lower than the above-average spending seen in 2014 and 2015 (12% and 8%, respectively), which was driven mostly by new specialty drugs, such as those used to treat hepatitis C.

During the next decade, health spending will continue to rise an average 5.8% a year compared with just under 5% in 2016. Increasing prices for medical services and increased demand resulting from an aging population and more people with insurance coverage will help push spending upward.

By 2025, 92% of Americans should have insurance coverage, CMS officials said.

The biggest effect will come in 2020 to 2025, when overall spending is expected to average 6% a year. Medicare beneficiaries are expected to demand hospital and physician services at a higher rate than in recent history, the authors said.

Health Aff. Published online July 13, 2016. Full text

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